Facebook to list on Nasdaq-100 Index

STOCK MARKET

Published 5:35 pm, Wednesday, December 5, 2012

Facebook agreed to list on the Nasdaq Stock Market when it went public in May and bargained for an early entry to the Nasdaq-100 Index, which may draw more buyers for the firm's shares.

Facebook agreed to list on the Nasdaq Stock Market when it went public in May and bargained for an early entry to the Nasdaq-100 Index, which may draw more buyers for the firm's shares.

Photo: Spencer Platt, Getty Images

Facebook to list on Nasdaq-100 Index

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Facebook stock has seen its share of challenges since the company went public on the Nasdaq in May, including its snafu-ridden $16 billion initial offering. But just seven months later, the resurgent stock will get a potentially significant boost, being added to the Nasdaq-100 Index next week.

The move was announced Wednesday after the Nasdaq exchange shortened its usual waiting period for inclusion in the gauge. The waiting period for entry into the index was a negotiating point with Facebook as it considered listing on Nasdaq or the New York Stock Exchange, a person with knowledge of the matter said in April.

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The Menlo Park-based social network with more than 1 billion users will replace Indian tech consulting firm Infosys before the start of trading on Dec. 12, Nasdaq OMX Group Inc. said.

The addition to the index may attract buyers to Facebook amid a 55 percent rebound from its low three months ago as funds that track the Nasdaq-100 buy the shares. The stock had plunged as much as 53 percent after selling for $38 a share in May. The shares recovered after Facebook's third-quarter sales rose 32 percent to $1.26 billion, topping analysts' estimates, amid a push to boost revenue from advertising on mobile devices.

'Additional demand'

"Adding Facebook to the index should create some additional demand for shares," said Colin Sebastian, an analyst at Robert W. Baird & Co. in San Francisco. "But more important in our view is the progress Facebook is making since the summer on mobile and with the ad exchange."

Facebook shares added just under 1 percent to $27.71 Wednesday.

Gaining entry to gauges tracked by investors is attractive to public companies because it provides a guaranteed shareholder base. Exchange-traded funds and other products linked to the Nasdaq-100 managed about $49.4 billion at the end of last year, according to data compiled by Nasdaq.

Facebook reportedly decided by April 5 to list on the Nasdaq Stock Market. Eight days later, the exchange operator shortened to three months the time a company must be listed on a "recognized market" before becoming eligible for the Nasdaq-100. It used to be at least two years, or one if a stock was among the top 25 stocks in the index by market value.

The rule change was implemented on April 23, the day Facebook disclosed in a regulatory filing that it picked Nasdaq over the NYSE.

Inclusion anticipated

Facebook's addition to the Nasdaq-100 was anticipated by investors and the benefits to the share price may be limited, said Josef Schuster, founder of Ipox Schuster. His firm has about $2 billion tied to indexes that track intial public offerings and has held Facebook shares since September.

"It will be supported till Dec. 12 by systematic buying, then after it may give away the short-term gains," he said. "Facebook has traded pretty strongly over the last five or six weeks and will continue to outperform the Nasdaq-100. The fact its inclusion is coming up will reinforce its outperformance."

Nasdaq lists eight of the 10 biggest U.S. technology companies by market value, including Apple, Microsoft, Google and Intel. The NYSE is the home venue for International Business Machines, ranked fourth, and Visa, the eighth biggest.

Facebook has a market capitalization of about $30 billion according to Nasdaq's calculations, based on 1.1 billion Class A shares outstanding.

Instagram change

Also Wednesday, a change made by Facebook's photo-sharing service Instagram ramped up its rivalry with Twitter.

Its users are experiencing "issues with viewing Instagram photos," San Francisco-based Twitter said in a blog post. Instagram, which Facebook bought in August for $715 million in cash and stock, has disabled a feature called Twitter cards for showcasing photos and other media. Photos from Instagram now appear cropped, Twitter said.

Facebook is stepping up efforts to more directly challenge Twitter, a service that has become the main outlet for many celebrities and politicians to share their thoughts with millions around the world. Instagram, which has more than 100 million users, wants users to go back to its own Web service for viewing photos, Kevin Systrom, co-founder of Instagram, said in a statement provided by Facebook.

The policy change better prepares Instagram for generating revenue from its service by driving traffic to its own properties where it might show advertisements, said Michael Gartenberg, an analyst at Gartner Inc. Facebook and Twitter are fighting for the attention of users, who have only so much time to devote to one service or another, he said.